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Pass-Through Effects of the East African Community Common External Tariffs on Kenya's Domestic Prices

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  • Mogendi, Justine Ongeri
  • Nganga, Tabitha Kiriti
  • Barasa, Laura Nelima

Abstract

This study offers an empirical microlevel analysis of the pass-through effects of the East African Community Common External Tariff on consumer prices in Kenya. Using data from the Kenya Integrated Household Budget Surveys conducted in 2005 and 2015, this research employs a fixed-effects model to estimate pass-through equations. The analysis focuses on consumer prices for agricultural and manufactured goods. It also considers household residential classifications, distinguishing between rural and urban areas, and it investigates the impact of border proximity and transportation costs on the pass-through effect. The findings show that manufactured goods have a significant pass-through effect. A 1% change in tariffs results in a 0.84% change in consumer prices for manufactured goods. However, the pass-through effects for agricultural goods were incomplete, suggesting that markets for manufactured goods are more competitive in Kenya. The study also found that pass-through effects vary depending on proximity to borders and the urban-rural divide.

Suggested Citation

  • Mogendi, Justine Ongeri & Nganga, Tabitha Kiriti & Barasa, Laura Nelima, 2023. "Pass-Through Effects of the East African Community Common External Tariffs on Kenya's Domestic Prices," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 38(3), pages 466-495.
    • Handle: RePEc:zbw:espost:278064
    DOI: 10.11130/jei.2023.38.3.466
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    References listed on IDEAS

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    1. Amiti, Mary & Cameron, Lisa, 2012. "Trade Liberalization and the Wage Skill Premium: Evidence from Indonesia," Journal of International Economics, Elsevier, vol. 87(2), pages 277-287.
    2. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    3. Emi Nakamura & Dawit Zerom, 2010. "Accounting for Incomplete Pass-Through," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(3), pages 1192-1230.
    4. Francis Lwesya, 2022. "Integration into regional or global value chains and economic upgrading prospects: an analysis of the East African Community (EAC) bloc," Future Business Journal, Springer, vol. 8(1), pages 1-14, December.
    5. Mr. Meredith A McIntyre, 2005. "Trade Integration in the East African Community: An Assessment for Kenya," IMF Working Papers 2005/143, International Monetary Fund.
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    More about this item

    Keywords

    Customs Union; Common External Tariff; Tariff Pass through; East African Community;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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